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Thursday, 1 September 2016

Saudi Arabia's growing crisis

In
the latest confirmation of Saudi Arabia's rapidly deteriorating
financial situation, having
recently sacked 16,000 foreign workers, earlier
today the Ministry of Islamic Affairs announced it has terminated the
services of 10,000 substitute imams to save 360 million Saudi Riyals,
or less than $100 million, the
Saudi Gazette reported. The ministry gave the
substitute imams the option to either transfer to the position of a
full-time imam leading five prayers a day at a mosque or to leave
their job all together.

“Many criticized the
role of substitute imams claiming they do not do anything useful.
Substitute imams receive a salary of SR3,000 a month. The ministry is
changing the job title and description of substitute imams to
cooperative preacher. Cooperative preachers are responsible for
giving sermons when needed,” said the source. The Gazette's source
also said cooperative preachers must have a bachelor’s degree in
Islamic Studies.

“The cooperative
preacher will receive monetary compensation and reward for his
services. He will follow the rules and regulations of a full-time and
official preacher. Substitute imams, imams and preachers have the
option to also become full-time imams and part-time preachers,”
said the source, adding that those who do not wish to be imams will
be cooperative preachers assigned to a mosque.

Qassim Ministry of
Islamic Affairs Public Relations Director Badr Al-Batty said the
ministry has already terminated the service of Friday sermons in
Qassim.

“Many have complained
about the termination of the service of substitute imams claiming
there will be a shortage of imams. People raised the question of what
will happen when full-time imams are on their annual leave,” said
Al-Batty. He also said people pointed out that the number of mosques
is growing and the need for more imams is rising.

“The ministry’s
changes in the title and job of its employees is applied to all areas
of the Kingdom. The ministry has a strict criteria to assign imams to
different mosques. The imams must be qualified for their positions
and must also be likable by the worshipers of the mosques,” said
Al-Batty.

* * *

However, the most
important, and most troubling, indicator of the precarious Saudi
financial situation, and one which continues to be largely ignored by
the media, remains the interbank rates charged by banks in Saudi
Arabia. As shown in the chart below, 3M interbank lending rates have
soared in the past year, and are now at levels not seen since the
financial crisis. As
noted previously,
should this indicator of increasingly tighter financial conditions
continue to rise relentlessly, it suggests that a banking crisis -
absent some external bailout - appears increasingly inevitable, and
if anything may be the best indicator whether and when Saudi Arabia
will finally fold, and do something unexpected vis-a-vis oil supply
to push the price of crude sharply higher.